Rite rightsFuneral home owners call state rules outdated, seek relief

By Tim StuhldreherJune 1, 2012 at 3:00 AM

Ernest Heffner, president of Heffner Funeral Chapel & Crematory Inc., said funeral homes need the freedom to meet changing trends. He is in the chapel of his company's location in West Manchester Township, York County. Photo/The Susquehanna Photographic

A court ruling last month could help bring some long overdue reforms to Pennsylvania's funeral industry, York County undertaker Ernest Heffner said.

The funeral industry is evolving, said the president of Heffner Funeral Chapel & Crematory Inc. Society is changing, consumer tastes are changing, and funeral homes need the freedom to meet those trends, he said.

"We have to be out in front of consumers, giving them what they want," he said.

That keeps prices high and competition limited, just the way the state industry's 1,000-member-strong trade association, the Pennsylvania Funeral Directors Association, wants it, Heffner and other critics said.

"State-based regulation of funerals is almost completely about protecting the undertakers from the public and from each other," said Joshua Slocum, executive director of the Funeral Consumers of America, a nonprofit based in Vermont.

The relationship between the board and association is a textbook example of "regulatory capture," Heffner and Slocum said. The term refers to an industry co-opting the regulatory mechanisms that are supposed to control it and wielding them for its own benefit.

"That's not true," said John Eirkson, the association's executive director.

Board appointments must be vetted by the state Senate and the governor, he said. Yes, many appointees are association members, but that doesn't taint them, and many issues before the board require industry expertise, he said.

In 2008, Heffner and a group of like-minded funeral home owners filed a federal lawsuit against the members of the state board, alleging the agency enforces outdated rules that benefit favored incumbents in the funeral market and unconstitutionally discourage competition.

Earlier this month, Judge John Jones III ruled in the plaintiffs' favor on 11 of the 12 issues they raised. He gave the state board 90 days to respond to his ruling.

Heffner called the ruling a win for progressive funeral home owners and a win for consumers.

"What the court wrote is really blunt and bold," he said.

Eirkson, however, said Jones went too far.

"It's sort of unprecedented for a federal judge to threaten to overturn state statutes like that," he said.

Spokesman Ron Ruman said he could not discuss the state board's plans, because the case remains in litigation.

"We will respond in court as we are able," he said.

The case could prompt regulators of other industries and professions to rethink whether their practices could withstand similar scrutiny, said Barbara Darkes, co-chairwoman of the litigation group at Harrisburg law firm McNees Wallace & Nurick.

Moreover, though the ruling has legal force only within Pennsylvania's Middle District of the federal court system, its reasoning could sway attitudes in other jurisdictions, she said.

"It does potentially have a nationwide impact," she said.

Funerals are big business, with funeral homes and crematories taking in revenue of $12 billion in 2007, according to the National Funeral Directors Association. Pennsylvania has 1,600 funeral homes performing an average of 72 funerals a year, Eirkson said.

Pennsylvania's Funeral Director law dates to the early 1950s. It sets strict rules on funeral home ownership and operations and empowers the board to enforce them.

Among the rules targeted in the lawsuit:

• Funeral homes may not serve food or alcoholic beverages.

• Every funeral home must have a room for preparing bodies; funeral homes with multiple locations cannot consolidate this part of the business.

• Funeral home names must include the name of a current or previous owner.

• The board may conduct unrestricted warrantless inspections of funeral homes without cause — a power that critics say it has abused.

The regulations are "without parallels in any other business or occupation," said James Kutz, a principal at Harrisburg law firm Post & Schell and the plaintiffs' chief counsel.

Repeatedly, Judge Jones found "no rational relationship" to the board's public safety mission.

"Time and again … a clearly ossified Board has refused to revisit regulations that appear both obsolete and ultimately unconstitutional," he wrote.

The law on funeral home ownership, for example, violates the constitution's Commerce Clause, Jones wrote.

The basic rule says only funeral directors may own funeral homes, and each individual may own only one funeral home and one branch.

However, there is no such limit for about 60 funeral home licenses issued before 1935. Moreover, spouses and children of funeral directors may inherit funeral homes, without needing any license or qualifications, and spouses may keep running them indefinitely.

Those rules put out-of-state individuals and corporations at a substantial and unconstitutional disadvantage compared with in-state heirs, Jones wrote. The Commerce Clause bars states from setting rules that benefit their citizens by burdening out-of-state competitors.

On only one issue, a state policy that requires cremation providers to affiliate with a funeral director, did Jones not find in the plaintiffs' favor.

"To my mind, it's half a dozen funeral directors that are looking to jeopardize the licensing system," he said, referring to the plaintiffs and their suit.

The plaintiffs aren't opposed to regulation, Kutz and Heffner stressed. They just want some standards and rules reasonably related to their purported rationale, they said.

Change will not benefit consumers as much as the plaintiffs claim, Eirkson said.

"I can guarantee you, funeral prices are not going to go down because of this ruling," he said.

Funeral parlors are among the last mom-and-pop businesses around, he said. Large funeral home corporations don't have the same close connections to a community and tend to view funerals as an industry rather than a personal service, he said.

Critics, however, call the business inefficient, saying far more funeral homes exist than a truly competitive market would support. Using the rule of thumb that a typical funeral home can handle about five funerals per week, Funeral Consumers of America compared each state's total deaths to its funeral home capacity and found most states have considerable oversupplies of homes. Pennsylvania has more than three times the number its death rate implies it needs, the group found.

Family ownership doesn't keep some funeral homes from being run poorly, he said.

Moreover, he added, all funeral homes employ local people who provide personal attention.

"I may have 100 employees on payroll," he said. "They don't own the company, but they give wonderful service to our customers."

It's a shame Pennsylvania taxpayers' money was spent fighting against their interests as consumers, Slocum said. Last week, Post & Schell filed suit to recover the $1.4 million it said it spent on the case.

While Jones' ruling is a step forward, lasting reform would require changing the composition of the state board, Slocum said.

As long as industry representatives form a majority, the organization is liable to slip back into its old ways, he said.

"It's a human tendency to try to protect your own," he said.

A balanced board would include a selection of consumer advocates, regulators and funeral industry representatives, and the latter would not be able to form a majority, he said.

"It would ultimately be good for the funeral business as well," he said.

What's next

Judge John Jones III gave the Pennsylvania State Board of Funeral Directors 90 days to respond to his ruling. The state board could choose to appeal, acquiesce or opt for some mix of the two.

Spokesman Ron Ruman said he could not discuss the board's plans, because the case remains in litigation.

Editor's note: This story was modified from its previous version. A misattributed quote has been corrected.